It could be a decade before the local economy recovers from the closure of the former Mylan Pharmaceuticals plant in Morgantown, with effects being felt almost immediately, according to an economic impact study released this week.
The layoff of 1,431 workers will result in the loss of 4,642 jobs in Monongalia County over the course of the coming year, economist Michael Shuman found in his economic analysis of the July 31 closure. This represents nearly 6% of the county’s existing jobs.
Shuman holds a law degree and two undergraduate degrees from Stanford University, and has studied community economics and the lasting effects of dozens of large plant closures for more than three decades. The study was commissioned by Democracy Collaborative, a national progressive research and community economic development lab.
In all his years of studying plant closures and the holes they leave in local economies, Shuman said the effects of the Mylan closure present some of the most striking figures he’s ever seen. This is for three reasons: the direct toll of the immediate layoffs, the reduction of spending at other businesses by Mylan itself and the reduction of employee spending in the local economy.
The indirect job loss number is so high in Mylan’s case, and different from most closures he’s studied, Shuman said, because of the facility’s storied history in the community and its highly-paid union workers.
“It’s very unusual for one direct job loss to generate two other indirect job losses. Usually it’s about half that or even less,” Shuman said by phone. “That makes this a particularly devastating event.”
“That is because the company has paid these workers a relatively high wage, and because the company having been a part of the Morgantown economy for many years and having all these supplier relationships,” he continued.
One company hit hard by Mylan’s departure is the local water utility, who last month approved 13% rate hikes for water customers, 12% for sewer customers and 18% for stormwater utility customers as a direct result of the expected closure. The utility claimed a $936,000 hit to its “bottom line.”
And Mylan workers have historically earned more than three times Monongalia County’s median income of $24,705, Shuman found, making them more active participants in the local economy. In recent months, Mylan workers have referenced one specific business, Kegler’s, a beloved sports bar down the street from the plant frequented by employees, that will certainly be affected by the closure. They mentioned a number of local restaurants, bars and businesses beyond Morgantown that are frequented by Mylan workers.
Employees also said they expect local contracting businesses they’ve used for years — landscaping, construction, roofing, fencing, home repair, HVAC, etc. — to lose their business once they move away this summer and fall. Employees said they expect businesses from gun ranges to mom-and-pop restaurants to lose dozens to hundreds of usual patrons.
Many of Mylan’s workers do not hold college degrees, and some told the Gazette-Mail in a May 28 profile of the layoffs that they don’t have high school degrees. Mylan was the dream job in this town. Once you found a way in, at whatever age, you dropped everything and took their offer, they said. This was the job you would retire with and the one that will grow your family.
“Those employees no longer have the purchasing power in the economy,” Shuman said.
Layoffs will remove $403 million in wages from the county economy in the next year and more than $1 billion in value added, which is the local economic equivalent of gross domestic product, Shuman found in his study. Additionally, layoffs will eliminate $62.8 million in state and local tax receipts and $82 million in federal tax receipts.
“I think over the next six months to a year, it will be a tsunami of economic effects,” he said.
Mylan’s plant closure is unique because it’s housed in the pharmaceutical industry, which is why Shuman said it’s hard to find anything he’s studied in the past to be comparable. But he pointed to a paper mill in Millinocket, Maine, that closed in 2008 and laid off 1,500 workers. The town had about 10,000 residents compared to Morgantown’s 30,000, and is more isolated than Monongalia County, Shuman said, but figures from both the economic analyses are similar.
“Even today, [Millinocket] has not recovered back to its former strength,” Shuman said.
The larger a region’s population, the faster its potential route back to the same economic level, Shuman said, which benefits Morgantown. The city and region have also long been propped up by West Virginia University through its state and private funding.
“So maybe it won’t take 20 years, maybe it’ll take five or 10 years — it depends what the community does in response to this — but it’s just going to be a huge body blow,” Shuman said.
Shuman predicted Mylan’s closure will hit the American economy in an outsized way. After former President Bill Clinton signed a number of trade agreements in the 1990s, Shuman said swaths of textile plants in Virginia and North Carolina closed and their jobs went out of the country. But employees did not need a high level of knowledge to work in these plants, which is why they were easily offshored.
That’s different from Mylan, where workers possess more than half a century of pharmaceutical manufacturing knowledge. The facility was once the American gold standard in the industry before corporate executives globalized operations for corporate profits. Shuman said the United States will pay for losing this knowledge by offshoring the work of “a high-knowledge based industry” to India and other countries.
Shuman lists his calculations as conservative because it does not consider the effects in the region outside Monongalia County, where a number of workers live and commute. A final point in the study also highlights the secondary effects on the unemployed workers themselves, “especially at a time of national economic downturn, including depression, alcohol and drug abuse, divorce, suicide, etc.”
Viatris, the corporation that now owns the Mylan plant, will close the facility’s doors next Saturday, and 1,246 workers will be laid off. Another nearly 200 workers are to be kept on until the facility completely shutters in March 2022, and then laid off.
Two Hail Marys were thrown this week on behalf of Mylan workers — the first coming Monday from Delegate Barbara Fleischauer, D-Monongalia, who formally requested critical infrastructure designation by the Department of Homeland Security to keep its doors open and its workers employed by the federal government. On Wednesday, a national political organization called on President Joe Biden to invoke the Defense Production Act to keep the largest generic drug manufacturer in the country in operation.